2022 OPERATIONAL PERFORMANCE IN LINE WITH THE REFOUNDATION PLAN
NET RESULT 2022 OF -€4 BN:
- REFLECTING THE COMPANY'S PROFOUND REORGANIZATION
- VERY STRONGLY DETERIORATED BY ANTICIPATED ASSET DEPRECIATION IN DECEMBER 2022
REAL ESTATE ASSETS VALUED AT €6.5 BN
FINANCIAL RESTRUCTURING WELL UNDERWAY:
- NET LEVERAGE TARGET OF 5.5X AT THE END OF 2025
- THE CONVERSION OF ALL OF ORPEA SA'S UNSECURED DEBT
- A RESTRUCTURING INVOLVING MASSIVE DILUTION OF EXISTING SHAREHOLDERS AND A THEORETICAL SHARE PRICE LOWER THAN 0.020€
DEADLINE FOR THE GENERAL MEETING TO APPROVE THE 2022 ACCOUNTS EXTENDED UNTIL 29 DECEMBER 2023 BY THE PRESIDENT OF THE COMMERCIAL COURT
1ST QUARTER 2023 REVENUES UP +10.2%
- IN FRANCE, OCCUPANCY RATES IMPROVING IN CLINICS, NO IMPROVEMENT OBSERVED TO DATE IN NURSING HOMES
- GOOD BUSINESS MOMENTUM IN OTHER GEOGRAPHIES
PUTEAUX, France, May 12, 2023--(BUSINESS WIRE)--Regulatory News:
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230511006000/en/
ORPEA Group (Paris:ORP) announces its consolidated results1 for the 2022 financial year ended 31 December 2022, approved yesterday by the Board of Directors, as well as its revenues for the 1er quarter 2023.
Laurent Guillot, Chief Executive Officer, comments: "The 2022 financial statements reflect the profound reorganization and the scale of the change that had to be driven within the company. 2022 will have been a year of change for ORPEA. Today, we are looking to the future. The Refoundation of the Group is well underway. In a few months, we have reconstituted an ethical and committed management team. We have redefined a strategy to serve our collaborators, care and support for patients, residents and their families. We have begun to restore our financial equilibrium to ensure the Group's long-term viability. Getting through these difficulties would never have been possible without the professionalism and commitment of our 76,000 employees who, on a daily basis, have never stopped caring for our residents and patients. I would like to sincerely thank them. Thanks to the proposed financial restructuring plan, which is to be submitted in the coming weeks to the vote of the classes of affected parties under the accelerated safeguard procedure, the Group will have a sound financial structure, the means to finance its Refoundation Plan, and will be able to devote itself serenely to the pursuit of its transformation."
As previously announced, while business remained resilient with growth of +8.9% for the year as a whole (including +5.5% organic), operating profitability was strongly affected, as the slight increase in the average occupancy rate was not sufficient to offset the effects of inflation and the decrease in Covid-19-related compensations. The 2022 EBITDAR margin fell sharply to 16.7% vs. 24.9% in 2021.
The 2022 consolidated financial statements include a significant decline in the value of assets recorded in the balance sheet. This is the result of asset impairments affecting the income statement in the amount of -€3.8 billion and a change in accounting method applied to real estate assets accounted for under IAS 16 in the amount of -€1.9 billion (excluding taxes), which is directly deducted from equity. This change of method was implemented in order to make ORPEA's accounts more comparable with those of companies with the same activity and consisted in restating the real estate assets at historical cost and no longer at revalued value (optional method under IAS 16). This total write-down of € -5.7 billion is in line with the forecast communicated on 21 December 2022. The impairments recorded are mainly the result of value tests carried out on the basis of the business plans specific to each establishment, drawn up as part of the strategic review carried out in the second half of the year.
On this basis, the Group's share of net result for the year 2022 is -€4 billion, leading to shareholders' equity of -€1.5 billion at the end of the year.
At 31 December 2022, the real estate portfolio was valued at €6.5 billion (including IFRS 5 assets held for sale), for a balance sheet value of €4.9 billion after the change in accounting method applied to the real estate assets previously accounted for using the optional IAS 16 method. As a reminder, as of 31 December 2021, the real estate portfolio was valued at €8.4 billion (including IFRS 5 assets held for sale), which corresponded to the revalued balance sheet value of the real estate complexes.
With regard to the progress of the financial restructuring, the Company has been benefitting from accelerated safeguard proceedings since 24 March 2023, in order to implement the accelerated safeguard plan proposed by the Company. This proposed plan has so far received majority support (approximately 51%) from ORPEA SA's unsecured financial creditors and the support of the Group's main banking partners. It will be submitted around mid-June to the vote of the classes of affected parties, including the existing shareholders of the Company.
The Group recalls that in the context of its financial restructuring, the envisaged capital increases will result in massive dilution for existing shareholders, who would hold, in the absence of reinvestment, less than 0.5% of the Company's share capital in the event of an accelerated safeguard plan approved by a two-thirds majority of all classes of affected parties, and less than 0.05% in the event of an accelerated safeguard plan imposed by cross-class cram down, which would be implemented in case of a negative vote by any of the classes.
Context of the approval of the 2022 consolidated financial statements by the Board of Directors
On 24 March 2023, ORPEA SA entered into an accelerated safeguard procedure with a draft safeguard plan based in particular on the lock-up agreement signed on 14 February 2023 with the Groupement, which meets the objectives of ORPEA S.A. to achieve a sustainable financial structure and to finance its Refoundation Plan presented on 15 November 2022, and which is the subject of a majority support (approximately 51%) of its non-secured financial creditors, and on the agreement of 17 March 2023 concluded with the Group's main banking partners (the "G6") providing in particular for the implementation of additional financing of €400 million coupled with additional bridge financing of €200 million up to the second capital increase.
Taking into account:
the Group's cash position as of May 4, 2023, which amounts to €354 million ;
the Company's cash flow forecasts, based on the following structural assumptions:
- New money debt contribution of €200 million in May 2023, €200 million in July 2023 and potentially €200 million in the last quarter of 2023 under the agreement with the main banking partners (accord d’étape);
- Successive capital increases planned in the last quarter for €1.55 billion in cash.
The Company considers that, as of the date of closing of the accounts, it can have an estimated cash position compatible with its forecasted commitments and thus be in a position to meet its cash requirements over the next 12 months.
On this basis, the Board of Directors has approved the financial statements for the financial year ended 31 December 2022 in accordance with the going concern principle.
2. Consolidated income statement
(*) EBITDAR is used by the Group to analyse its operating performance. It corresponds to operating income before rental expenses not eligible for IFRS 16 "Leases", depreciation and provisions, other operating income and expenses, interest and taxes.
(**) L’EBITDA correspond à l’EBITDAR, après déduction des charges locatives en application de la norme IFRS 16
The amount of rents not deducted from EBITDA under IFRS 16 amounted to €359 million in financial year 2021 and €414 million in financial year 2022 (the increase being mainly due to the Group's development). EBITDA excluding the impact of IFRS 16 amounted to €682 million for the full year 2021 and €342 million for the full year 2022.
Revenue for 2022 amounted to €4,681 million, an increase of +8.9%, of which +5.5% was organic, in line with the target announced on 15 November 2022.
Revenue in France rose by +2.1% (of which +1.9% organic) despite the crisis affecting the Group's retirement homes. The other geographic regions recorded high growth rates thanks to the improvement in business linked to the gradual recovery from the health crisis and the ramp-up of newly opened facilities.
EBITDAR will be €780 million in 2022, representing a margin of 16.7%, compared with 24.9% in 2021. This decrease of a total of -824 bps, is mainly due to:
for approximately -280 bps, an increase in personnel costs as a result of the salary pressures in the various geographical areas and the acceleration of recruitment in France over the September-December 2022 period;
for approximately -270 bps, an increase in other costs, with the most marked inflationary effects on food and energy. The Group's energy costs as a percentage of revenues in 2022 amounted to 3.5%, compared with 2.3% in 2021;
for approximately -185 bps, the reduction or elimination of the Covid-19 subsidies received in the various countries, which the increase in the Group's occupancy rate between the two fiscal years did not offset;
for approximately -90 bps, due to other factors, in particular the recognition in 2021 of significant amounts of specific income not carried over in 2022 (reversal of provisions, relief from social security charges and VAT credits).
EBITDA amounted to €756 million compared with €1,041 million in 2021, representing a margin of 16.2% of revenues.
EBITDA excluding IFRS 16 amounted to €342 million, representing a margin of 7.3%.
Current operating income amounts to €-49 million, compared with €396 million in 2021. This evolution was mainly due to a decline in operating profitability and an increase in depreciation and amortization related to the opening of new facilities.
Income before tax was €4,591 million, including €4,223 million of non-recurring items resulting mainly from:
- impairment tests on tangible and intangible assets (IAS 36): all asset review work, based on new business plans drawn up by each facility worldwide and on other parameters specific to each asset class (in particular changes in real estate yields), has led to an adjustment of the values of a large proportion of the company's tangible and intangible assets, resulting in a charge of €3.1 billion to the income statement, with no impact on the Group's cash flow;
- impairment losses on financial receivables of €0.5 billion, based on negotiations to date to unwind certain partnerships established by the former management and an assessment of the recoverability of the underlying assets;
- 0.4 billion in depreciation on real estate assets (notably Greenfield);
- exceptional expenses related to the management of the crisis that hit the Group in 2022 of €0.1 billion.
Net financial income was -€319 million, representing an increase of the expense of 28%. This change reflects the increase in gross financial debt, combined with higher interest rates and margins associated with the June 2022 refinancing.
Group net result for the financial year 2022 amounted to -€4,027 million.
3. Main aggregates of the consolidated balance sheet
As of 31 December 2022, the book value of net tangible assets amounted to €5.0bn, down €3.1bn. This change is mainly due to impairment losses recognized on real estate assets (€1.4 billion recognized in the income statement) and a change in accounting method applied to real estate assets recognized under IAS 16 (€1.9 billion excluding the tax effect, recognized directly against equity).
At December 31, 2022, the balance sheet value of the real estate assets was €4.9 billion, with a total economic value of €6.5 billion. This amount includes €4.9 billion of assets valued by independent experts (based on an asset yield of 5.1%), the balance being maintained at book value.
Intangible assets and goodwill amounted to €1.6bn and €1.4bn respectively. These decreases, of €1.5 billion and €0.3 billion respectively, are mainly the result of impairment tests carried out on assets in accordance with IAS 36.
Cash and cash equivalents at the end of 2022 amounted to €856 million and €354 million at May 4, 2023.
Net financial debt amounted to €8.8bn (excluding IFRS 16 lease debt), up €0.8bn over the period. Given the covenants in the financing documentations of the Group, and notwithstanding the neutralization of their possible future consequences by the conciliation and accelerated safeguard procedures and their adjustment, an amount of €6.5bn of long-term financial debt directly and indirectly concerned has been reclassified in the accounts as financial liabilities due within one year. For the concerned debts at the level of ORPEA SA, the conciliation and accelerated safeguard procedures have led to a suspension of the contractual provisions relating to these covenants. As regards the other debts concerned, which are at the level of Group subsidiaries, the Company has obtained a waiver from the corresponding creditors since 31 December 2022, concerning their non-application at 31 December 2022 and a modification of these covenants. A sole indebtedness covenant (net debt/EBITDA excluding IFRS 16 < 9.0x) will be applicable as from June 2025.
The increase in gross financial debt of €0.8 billion (excluding IFRS 16 lease debt) is mainly related to tranches A and B put in place in June 2022, net of repayments of existing debt. More specifically, the corresponding cash contribution of €1.7 billion was used mainly to finance development capex (for nearly €0.55 billion), to service debt excluding G6 banks (interest and principal, for nearly €0.85 billion) and to service debt of G6 banks (interest and principal, for nearly €0.3 billion).
The maturity schedule of gross financial debt by type (excluding IFRS 16 rental debt and excluding accounting reclassifications to short-term debt) at the end of 2022 is summarized below:
On a pro forma basis of the proposed financial restructuring (conversion in equity of €3.8 billion of unsecured debt of ORPEA S.A. and additional financing of €400 million), the maturity schedule of gross financial debt as of 31 December 2022 would be as follows:
Consolidated shareholders' equity stood at -€1.5bn at December 31, 2022, mainly due to the net loss for the year (-€4bn) and the impact of the change in accounting method applied to real estate projects accounted for under IAS 16 (-€1.5bn after tax effect).
4. 2022 Financing Table (excluding IFRS 16 impact)
Cash flow from operating activities amounted to €122 million after deducting maintenance Capex and IT Capex.
Development capex, mainly real estate (Greenfield projects), amounted to €638 million, down from the forecast of 15 November 2022 (€705 million).
The real estate disposals result mainly from a transaction in the Netherlands.
Non-current items include expenses related to the management of the crisis experienced by the Group.
At the end of 2022, net financial debt (excluding IFRS) had increased by €916 million to €8,860 million.
5. Update of the Business Plan presented on 15 November 2022
The 2022-2025 Business Plan underlying the Refoundation Plan presented on 15 November 2022 has been updated to take into account, on the one hand, the 2022 achievements and the consequences of the various reviews carried out in the context of the closing of the 2022 accounts, and, on the other hand, the terms and conditions of the proposed accelerated safeguard plan (to be related to the assumptions related to the financial restructuring that had been retained last fall).
The business outlook for the 2022-2025 period remains broadly unchanged, the only notable differences being an accounting reclassification of IT expenditure from capital expenditure to operating expenditure (€19m in 2022, €30m for subsequent years), with no impact on operating flows (lower EBITDAR offset by lower capex), and a slight downward revision of the development capex envelope over the period (nearly €75m out of a total of around €1.6bn).
The financial projections are essentially impacted by the terms and conditions of the draft Safeguard Plan, namely a cash capital increase of €1.55 billion (compared to an average of €1.4 billion in the vision of 15 November 2022) and an additional secured financing of €0.4 billion (instead of €0.6 billion in the vision of 15 November 2022 and excluding bridge financing of €0.2 billion in 2023).
On this basis, and before taking into account the commitment made to the G6 banks regarding real estate disposals, the Group's net debt is now projected at €4.5bn at the end of 2025 (instead of €4.9bn), corresponding to a leverage of 6.3x (instead of 6.5x), based on a 2025 EBITDA excluding IFRS 16 of €715m (instead of €745m).
With a view to achieving the objective of reducing the Group's holding of real estate assets in operation to 20-25%, the Group has made a commitment to the G6 banks and in the context of the safeguard plan to dispose of at least €1.25 billion of real estate assets (in gross value and excluding rights) over the period 2022-2025. These additional real estate disposals will leave the Group's EBITDAR unchanged, but will lead to a reduction in EBITDA excluding IFRS 16 due to the addition of rental payments corresponding to the leases on the real estate assets sold, this new expense being partially offset by the reduction in financial expenses concomitant with the repayment of the Group's debt with the net proceeds from the real estate disposals.
In total, taking into account the net proceeds of additional real estate disposals and other impacts related to these disposals (higher rents in the face of lower financial charges), compared to the initial plan the updated Business Plan finally projects that the Group's net debt will be reduced to nearly €3.7 billion at the end of 2025, corresponding to a leverage of 5.5x (instead of 6.3x), based on a 2025 EBITDA excluding IFRS 16 reduced to €671 million (instead of €715 million)
6. General Meeting to approve the 2022 financial statements
In accordance with the applicable legal provisions, the Company requested and obtained from the President of the Commercial Court of Nanterre an extension of the meeting time of the General Meeting of Shareholders responsible for approving the financial statements for the financial year which ended 31 December 2022. The order issued by the President of the Nanterre Commercial Court on 11 May, 2023 extends the meeting deadline to 29 December 2023. Consequently, the Company will convene and hold its annual shareholders' meeting before this date and, in any event, following acquisition of their stake in the capital of the Company by the new shareholders.
7. Revenues for the 1er quarter 2023
Geographic breakdown: Central Europe (Germany, Italy and Switzerland), Eastern Europe (Austria, Poland, Czech Republic, Slovenia, Latvia, Croatia), Iberian Peninsula and Latin America (Spain, Portugal, Brazil, Uruguay, Mexico, Colombia, Chile), Other countries (China).
* The organic growth in Group revenues includes: 1. the change in revenues (N vs. N-1) of existing facilities resulting from changes in their occupancy rates and daily rates; 2. the change in revenues (N vs. N-1) of facilities restructured or whose capacity was increased in N or in N-1; 3. the revenues generated in N by facilities created in N or in N-1; 3. Revenues generated in N by facilities created in N or N-1, and the change in revenues of recently acquired facilities over a period equivalent in N to the consolidation period in N-1.
ORPEA recorded growth of +10.2% in the first quarter of 2023, of which +9.5% was organic.
In Q1 2023, the average occupancy rate was 83%, up +160bps vs. Q1 2022.
In France, business was solid in the clinics, while the occupancy rate in long-term care facilities has not yet recovered.
In Central and Eastern Europe and in the Iberian Peninsula and Latin America, business benefited from an increase in occupancy rates and a favorable price effect.
Change in occupancy rate (Q1 2023 vs. Q1 2022)
8. Reminder of the consequences of the financial restructuring for existing shareholders
The Company has been under accelerated safeguard procedure ("procédure de sauvegarde accélérée") since 24 March 2023. The purpose of this procedure is to allow the implementation of the accelerated safeguard plan proposed by the Company. This draft plan has so far received the support of the majority (approximately 51%) of ORPEA SA's unsecured financial creditors and the support of the Group's main banking partners. It is to be submitted around mid-June to a vote of the classes of parties affected, including the existing shareholders of the Company.
The envisaged plan provides for 3 capital increases:
A first capital increase with preferential subscription rights backstopped by the unsecured financial creditors of ORPEA S.A. by way of set-off against their claims for approximately €3.8 billion;
A second capital increase in cash allowing the Groupement to enter the capital for an amount of approximately €1.15 billion;
A third capital increase in cash with preferential subscription rights for an amount of approximately €0.4 billion.
In the event that the Accelerated Safeguard Plan is not approved by one or more of the classes of affected parties, it may, pursuant to article L.626-32 of the French Commercial Code, be approved by the Commercial Court at the request of the Company or the judicial administrator with the agreement of the Company and be imposed on the class or classes of affected parties that did not vote in favor of it, subject to compliance with the conditions set forth in the aforementioned provisions ("cross-class cram-down").
In such cross-class cram-down scenario, the Accelerated Safeguard Plan will provide for the issuance, in the context of each of the planned capital increases, of a number of new shares ten times higher than the number of new shares that would be issued in the hypothesis of a favorable vote of the Accelerated Safeguard Plan by each of the classes of affected parties, resulting in a dilution of the existing shareholders (in the event that they decide not to participate in any of the capital increases), ten times higher, in the event of cross-class cram-down. This would result, in the event of cross-class cram-down, in the issuance of new shares at issue prices ten times lower than the issue prices applicable in the event of a favorable vote of the Accelerated Safeguard Plan by each of the classes of affected parties.
The Group reminds that in the context of its financial restructuring, the envisaged capital increases will lead to a massive dilution for the existing shareholders, who would hold, upon completion of the financial restructuring, and if they decide not to participate in the capital increases, approximately 0.4% of the Company's share capital in the event of approval of the accelerated safeguard plan by each of the classes of affected parties, and approximately 0.04% in the event of non-approval of the accelerated safeguard plan by at least one of the classes of affected parties.
On the basis of the financial parameters on which the draft Safeguard Plan is based and in application of the aforementioned principles, assuming an approval of the accelerated Safeguard Plan by each of the classes of affected parties, the issue price of the first capital increase with preferential subscription rights (conversion into capital of the unsecured debt of ORPEA SA) would be approximately € 0.60 per share, the issue price of the second capital increase (capital increase allowing the entry of the Groupement) would be approximately € 0.18 per share and the issue price of the third capital increase with preferential subscription rights (capital increase in cash) would be approximately € 0.13 per share, i.e. at levels significantly below the current share price. Thus, under these conditions, the theoretical unit value, after the various transactions on the capital and before any possible consolidation of shares, would be less than €0.20 per share.
On the basis of the financial parameters on which the draft Safeguard Plan is based and in application of the aforementioned principles, in the event of non-approval of the accelerated Safeguard Plan by at least one of the classes of affected parties, the issue price of the first capital increase with preferential subscription rights (conversion into capital of the unsecured debt of ORPEA SA) would be approximately € 0.06 per share, the issue price of the second capital increase (capital increase reserved for the Groupement, with a priority subscription right for existing shareholders in the event that the shareholders, gathered in a class of affected parties, do not approve the plan) would be approximately €0.018 per share and the issue price of the third capital increase with preferential subscription rights (capital increase in cash) would be approximately €0.013 per share. This would lead to a theoretical unit value, after the various transactions and before any possible consolidation of shares, of less than €0.02 per share.
In both cases, the issue price of the new shares of the first capital increase is more than three times higher than the issue price of the shares of the second capital increase, as well as the theoretical unit value of the share after all operations.
ORPEA is a leading global player, expert in providing care for all types of frailty. The Group operates in 22 countries and covers three core businesses: care for the elderly (nursing homes, assisted living facilities, homecare and services), post-acute and rehabilitation care and mental health care (specialized clinics). It has more than 76,000 employees and welcomes more than 255,000 patients and residents each year.
ORPEA is listed on Euronext Paris (ISIN: FR0000184798) and is a member of the SBF 120, MSCI Small Cap Europe and CAC Mid 60 indices.
Disclaimer - forward-looking information
This press release contains forward-looking statements that involve risks and uncertainties, including those included or incorporated by reference, regarding the Group's future growth and profitability that could cause actual results to differ materially from those indicated in the forward-looking statements. These risks and uncertainties relate to factors that the Company cannot control or accurately estimate, such as future market conditions. The forward-looking statements in this press release constitute expectations of future events and should be treated as such. Actual events or results may differ from those described in this document due to a number of risks or uncertainties described in the Company's 2021 Universal Registration Document, which is available on the Company's website and on the AMF website (www.amf-france.org), and in the 2022 Half-Year Financial Report, which is available on the Company's website.
Organic growth in Group revenues includes :
EBITDAR is used by the Group to analyse its operating performance. It corresponds to operating income before rental expenses not eligible for IFRS 16 "Leases", depreciation and provisions, other operating income and expenses, interest and taxes.
EBITDA Corresponds to EBITDAR, after deduction of rental expenses in accordance with IFRS 16
Net financial debt
Long-term financial debt + short-term financial debt - cash and marketable securities (excluding lease liabilities - IFRS 16 and IFRS 5 liabilities)
The capitalization rate of real estate or rate of return is the ratio between the rent and the value of the building
Cash-flow from operations
Cash flow from operating activities includes the cash impact of operations
CONSOLIDATED FINANCIAL STATEMENTS AT THE END OF 2022
Consolidated income statement
Consolidated balance sheet
Cash flow statement
Information about Alternative Performance Measures ex IFRS 16
Business Plan 2022-2025 underpinning the Refoundation Plan
Update of the financial projections presented on 15 November 2022 in the light of the 2022 financial statements and the terms and conditions of the Accelerated Safeguard Plan (Plan de Sauvegarde Accélérée)
The business outlook for the 2022-2025 period covering the implementation of the Refoundation Plan and presented on 15 November 2022 remains unchanged at this stage, with the first years of the business plan corresponding to the 2022 achievements and the 2023 budget approved by the Company Board of Directors at the beginning of the year. Nevertheless, the financial projections attached to these forecasts, as well as certain management indicators and targets for 2025, must be updated in the light of, on the one hand, the 2022 achievements and the various reviews carried out in the context of the 2022 financial statements, and, on the other hand, the terms and conditions of the draft accelerated safeguard plan as set out in the lock-up agreement concluded with the Groupement and a majority of the non-secured creditors of ORPEA SA and the agreement concluded with the G6 banks on 17 March. These terms and conditions are to be reported to the financial restructuring assumptions adopted on 15 November 2022.
Impacts related to the various reviews carried out within the framework of the 2022 financial statement
The detailed review carried out in the context of the 2022 financial statements led to the reclassification of certain IT expenses as operating expenses (OPEX) when they were classified as capital expenses (CAPEX) in the vision of 15 November 2022. This has the consequence of reducing, all other things being equal, EBITDAR and EBITDA excluding IFRS 16 by nearly € 19 million in 2022 and € 30 million on an annual basis in 2023 and following years (due to the ramp-up of the IT program). In return, CAPEX IT is reduced by the same amount, leading to this new accounting treatment being neutral in terms of operating cash flow.
The completion of the balance sheet review work, the analysis of the cut-off at the end of 2022, marked by significant differences in payments from one year to the next, and the continuation of the detailed review of the projects under development led to the updating of CAPEX forecasts and other operational flows (changes in WCR, non-current items, etc.) in the 2023-2025 period. In this context, from one vision (15 November 2022) to the next (May 2023) and cumulatively in the period 2022-2025:
- Operating cash flows remain broadly unchanged, with the lower maintenance and IT CAPEX in 2022 balancing changes in WCR that were more unfavorable than originally anticipated;
- The cost of the CAPEX development program in the period 2022-2025 has been adjusted downwards by an amount of around € 75 million;
- The flows related to non-current items and those related to the day-to-day management of the asset portfolio (as originally projected in the business plan) remain broadly unchanged.
On this basis, and taking better account of the effects of changes in the scope of consolidation, the net impact of the update would be a reduction in net debt at the end of 2025 of approximately € 50 million.
Impacts of the terms and conditions of the safeguard plan (plan de sauvegarde) before taking into account the real estate disposal program
The main differences between the terms and conditions of the safeguard plan and the assumptions relating to the financial restructuring originally envisaged are as follows:
- New money Equity calibrated at €1,550 million instead of €1,400 million;
- A new money debt calibrated at €400 million (excluding additional bridge financing of €200 million drawable in 2023) instead of €600 million, now structured in the form of a RCF, and with a margin of 2% instead of 5%;
- The equitization of the non-secured portion of the Euro PP December 2026 ;
- A margin for tranches A-B-C set at 2% instead of 1,75%, with historical rates to be applied over a longer period (the date of completion of the financial restructuring is now projected to be the fourth quarter);
- Compulsory depreciation of tranche A for the years 2023-2026.
On these bases, the savings in the cumulative interest expense (approximately € 90 million), the larger capital increase in cash (€150 million) and the increase in the amount of equitized non-secured debt (approximately €60 million) would lead to a reduction in net debt at the end of 2025 of approximately €300 million.
Under these conditions, and before taking into account the commitment regarding real estate disposals made to G6 banks, the Group's net debt would amount to €4.5 billion at the end of 2025 (instead of €4.9 billion), corresponding to a leverage of 6.3x (instead of 6.5x), based on 2025 EBITDA excluding IFRS 16 of €715 million (instead of €745 million).
Impact of the commitment made in terms of real estate disposals to be carried out on 2022-2025
In view of the objective of a future holding of the operating real estate portfolio reduced to 20-25%, the Group has committed to G6 banks and, as part of the safeguard plan, to have made at least 1.25 billion euros in real estate disposals (gross value and excluding duties) over the 2022-2025 period. Compared to the current flow of real estate disposals that was included in the business plan presented on 15 November 2022, this corresponds to an additional volume of real estate disposals of nearly € 1.0 billion over the years 2024-2025.
These additional real estate disposals will leave the Group's EBITDAR unchanged but will lead to a reduction in EBITDA outside IFRS 16 by adding rents corresponding to leases of the transferred real estate assets, this new expense being partially offset by the reduction in financial expenses associated with the repayment of the Group's debt with net income from property disposals.
In total, based on net income (after tax) from additional real estate sales estimated at nearly €850 million and an accumulated balance of rent / savings in financial expenses amounting to nearly €20 million in aggregate, the Group's net debt would be reduced to € 3.7 billion at the end of 2025, corresponding to a leverage of 5.5x (instead of 6.3x), based on EBITDA 2025 excluding IFRS 16 reduced to €671 million (instead of €715 million).
Summary: New EBITDA trajectories (excluding IFRS 16) and reduction of financial leverage
In conclusion, the updated vision of the 2022-2025 Business Plan underpinning the Refoundation Plan, taking into account the terms and conditions of the proposed accelerated safeguarding plan, including the commitment to implement a €1.25 billion property sale program over the 2022-2025 period, is based on an EBITDA sequence excluding IFRS 16 adjusted as follows:
Furthermore, on the basis of this new EBITDA sequence excluding IFRS 16 and the new financial projections corresponding to the terms and conditions of the accelerated safeguard plan, the net debt and financial leverage projected at the end of 2025 would be adjusted as follows:
APPENDIX 2.1: 2022-2025 Business Plan presented on November 15, 2022 (reminder)
APPENDIX 2.2: Updated Business Plan 2022-2025
Vision before taking into account the real estate disposal program
APPENDIX 2.3: Updated 2022-2025 Business Plan
Vision after taking into account the real estate disposal program
APPENDIX 3: financial presentation dated 12 May 2023
1 The audit procedures on the consolidated financial statements have been performed by the Statutory Auditors. The certification report will be issued after verification of the management report and finalization of the procedures required for the filing of the Universal Registration Document. It will include an observation referring to the justification in the accounts of management's maintenance of the going concern accounting principle, as well as an observation on the change in IAS 16 method related to the abandonment of the revaluation method for real estate complexes.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230511006000/en/
Investor Relations Manager
Toll-free number for shareholders :
0 805 480 480
Tel: 01 44 71 94 94
Press Relations Director
Tel: 07 70 29 53 74
Charlotte Le Barbier
Tel: 06 78 37 27 60
Tel: 06 89 87 61 37